DraftKings Announces Virginia Launch Of Mobile Sports Betting: What's Next For The Sector?
Investors are placing big bets on their favored sports betting operators as more and more states move to allow online gambling.
What Happened: Just in time for the Super Bowl, DraftKings Inc. (NASDAQ: DKNG) announced the launch of its online sports betting app in Virginia on Sunday.
The move into Virginia marks the 12th state where DraftKings is now available, following a number of state markets that it entered over the last six months as it tries to catch up to competitor Penn National Gaming Inc. (NASDAQ: PENN).
Penn has a footprint in 19 states through its properties and recently teamed up with Dave Portnoy to launch its Barstool Sportsbook Mobile app.
Why It Matters: While DraftKings and Penn race to launch their competing apps across the U.S., there’s only so far they can go until more states legalize online betting.
The federal government now allows states to make their own rules when it comes to gambling, and so far more than a few have remained resistant.
The four most populous states — California, Florida, New York and Texas — have yet to pass legislation to allow for online betting and casinos.
These four states have a combined population of over 100 million, or just under one-third of the total U.S. population.
The hurdles the governments in each state have to pass online gambling vary, but they have one thing in common that increases the likelihood of a serious look at legalizing betting apps: a desperate need for tax revenue following the economic issues the coronavirus pandemic will leave behind.
Here's a look at the sports betting environment in the country's four largest states by population.
California: The most populous state has so far been resistant to any form of legalized online betting. In California, all of the state’s casinos are owned by Indigenous tribes and there has been little support to change this.
In December, tribal leaders collected enough signatures and met a key submission deadline to add a sports betting measure onto the 2022 ballot.
It looks as though, if passed, online gambling would remain monopolized by Native Americans in the state and make it difficult for DraftKings or Penn to launch there.
Florida: In-person gambling in the Sunshine State is legal, but online betting remains illegal — at least technically for now.
The wording that bans online gambling was written into law in 2013 when former Lt. Gov. Jennifer Carroll was accused, and later acquitted, of running a gambling scheme through a charity organization in internet cafes in the state.
Some of that wording has since been clarified or removed, and Florida looks likely to allow online gambling in the future.
New York: New York Gov. Andrew Cuomo recently proposed to legalize online sports betting. His plan has come under fire from some lawmakers in regards to its approach.
Cuomo’s plan is to allow providers to launch in the states through a bidding war, which would make the process for prospective operators like DraftKings and Penn Gaming highly competitive. Although these issues are still being discussed by lawmakers and the details are being ironed out, legalized gambling in the state looks to be all but a sure thing in 2021.
Texas: The Lone Star State has two bills on the table to legalize gambling.
One bill, said to have the best chance of passing, was introduced by Republican state Rep. Harold Dutton.
Although considered to have a conservative-leaning population, sports are a big deal in the state, and with only two brick-and-mortar casinos, Texans have few options when it comes to any form of gambling.
The fate of sports betting looks set to be decided by May 31, which is the deadline for the legislative process in the state to take place.
What’s Next: State leaders are under pressure to find funds to cover budget shortfalls as a result of the COVID-19 recession.
Taxes that can be collected through online gambling and sports betting must seem like a pandemic-friendly and relatively easy way to recoup government funds that have been spent to help individuals and businesses stay afloat through the pandemic.
Outside the U.S., Ontario, Canada is set to legalize online sports betting this year with a bill that has huge bipartisan support.
Bill C-13 would change the criminal code to allow Ontarians to participate in online sports betting and give operators such as DraftKings and Penn Gaming the opportunity to move into the Canadian space.
If Ontario, Texas and New York all moved to legalize, the online sports betting market could increase by $30 billion.
Photo courtesy of DraftKings.
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